While tax law doesn’t specify how to measure a distance between two points, under case law, the difference in distance has been determined by looking to the ‘shortest normal route’ a person would take.wenjin chen/AFP/Getty Images
The Tax Court of Canada has ruled in favour of a taxpayer who deducted relocation expenses related to a move for a new job, relying on Google Maps to demonstrate he met the distance threshold requirement.
Under the Income Tax Act, a taxpayer may deduct eligible expenses, such as real estate commissions on the sale of a home, when relocating to a new residence that is 40 kilometres closer to their new job than their old residence.
While tax law doesn’t specify how to measure a distance between two points, under case law, the difference in distance has been determined by looking to the “shortest normal route” a person would take.
In De Kruyff v. The King, a decision released on Aug. 25, the taxpayer appealed the denial of $130,000 of relocation expenses related to a move he made in January, 2020, to Mississauga from Newmarket, Ont., to be closer to a new job in downtown Toronto.
The taxpayer, an investment management professional, used Google Maps to show that the travel distance between his old residence and his new office was more than 40 kilometres greater than the travel distance between his new residence and his new office.
The Canada Revenue Agency (CRA) also used Google Maps to determine the taxpayer’s travel distance, but made a key error.
Due to a time zone issue, the CRA agent, based in the Vancouver area, used a time of 7:45 p.m. Eastern Time (ET) to generate the route from the taxpayer’s old residence to the new job, rather than the 4:45 p.m. ET rush-hour time that the taxpayer had used.
That error resulted in the app recommending a different route than the one it had recommended to the taxpayer. The 7:45 p.m. route yielded a travel distance difference between the new and old residences that fell short of the 40-kilometre threshold.
The judge in the decision noted that traffic conditions in the Toronto area differ “dramatically” between 4:45 p.m. and 7:45 p.m. on an average weekday, which would account for the difference in recommended routes.
Despite its error, the CRA took the position that the shortest normal route should be determined by an objective measure that combined the shortest route with the one normally taken by the public, rather than a subjective one that potentially might allow a taxpayer to choose a “38-turn slalom course” route to satisfy the distance requirement.
In this case, the shortest normal route would have been the one Google Maps had recommended for the 7:45 p.m. commute, the CRA argued.
However, the judge rejected the CRA’s argument, saying the taxpayer’s decision to use Google Maps’ recommended route at the correct travel time was reasonable.
“Most people who drive each day have the software and consult it to select the route they would follow because it removes variables not otherwise detectable by paper maps,” the judge wrote in his ruling.
Using Google Maps or a similar technology “to provide data to inform and choose the shortest normal route does not offend or cause ‘violence’ to that established test, the Act, or common sense,” the judge wrote.
Jennifer Mak, an associate with Counter Tax Litigators in Toronto, says the De Kruyff v. The King decision is “very consistent” with a broader trend she’s seeing of the use of digital evidence in tax disputes.
“We’re seeing the CRA and [tax advisors] using tools such as Google Maps, iPhone metadata, location tags on e-signatures and Google Street View,” says Ms. Mak, who was not directly involved in the case. “That’s kind of the new normal in shaping outcomes in our tax litigation cases.”